Category: States

The Supreme Court is expected to rule soon on the legality of insurance subsidies in 37 states that use the federal HealthCare.gov site. Some states have discussed creating their own exchanges in the wake of the court’s decision, but those may not be fiscally sustainable.

The Los Angeles Times reported last week that Covered California, the Golden State’s exchange, “is preparing to go on a diet,” cutting its budget 15% for the fiscal year beginning July 1 because of lower-than-expected enrollment. Earlier this month, Hawaii’s state exchange prepared plans to shut down this fall amid funding shortfalls. Hawaii’s exchange had technical problems that have impeded signups since its launch, but Covered California has had relatively few computer glitches. During the HealthCare.gov rollout problems in 2013, columnist Paul Krugman held up California as a model of efficiency:

Health care reform has dominated our nation’s political and social conversations for the past six years. After the implementation of ObamaCare, it is clear the law brought radical change and real pain to our nation’s families, economy, and health care system. The promised “affordable health care fix” made things worse.

The pending King v. Burwell case reveals another interesting legal problem with the policy and text of the Affordable Care Act. As written, the federally controlled subsidies and employer mandates are not allowed, unless a state chooses them. Now the Supreme Court debates, behind closed doors, the question of state responsibility and textual intent to determine the direction of health care in America. The resulting Supreme Court opinion could dismantle the structure of ObamaCare and give America a second chance to get health care reform right.

Ironically, the issue of state responsibility could take ObamaCare down and lift individual citizens up.

The collapse of Hawaii’s state-run health exchange has observers wondering which of the other beleaguered exchanges could be next to fail.

Hawaii dumped its Obamacare exchange last week after state lawmakers refused to pump an additional $28 million into what they saw as a failed experiment.

Despite using up $135 million of an appropriated $205 million, Hawaii Health Connector fell well short of goals, enrolling just 37,000 Hawaiians since 2013.

The program ceased taking new enrollees on Friday, and health officials will end outreach services at the end of the month. The exchange’s 70-plus employees, temps and contractors will go home for good on Feb. 28, 2016.

The decision by lawmakers to abandon the exchange came after the federal Centers for Medicare and Medicaid Services restricted the state’s grant money. Earlier this year, the group warned Hawaii Health Connector would lose funding for not integrating with Medicaid or reaching target enrollment goals.

It’s time now for your monthly reminder that Obamacare neither “working in the real world,” “proving its critics wrong,” nor “blowing away expectations:”

Colorado (higher taxes): “The Connect for Health Colorado board of directors voted unanimously Thursday to raise the fees it charges on health insurance policies to bolster its finances as federal grants run out later this year. The state health insurance exchange raised the fee on 2016 plans purchased through its marketplace from the current 1.4 percent of premiums to 3.5 percent, the same rate charged on the federal exchange…Although insurance carriers pay the fees to the exchange, they acknowledge fees are passed on to consumers in one form or another…The fee increases are projected to help bring revenues to about $40 million in fiscal year 2015-16. It would cover operational expenses, but not capital costs, such as improving the computer system…”

This year was supposed to be the first wherein Obamacare’s state-based insurance exchanges would be self-sufficient. By now, the law’s architects assured, the exchanges would be thriving, competitive marketplaces, where all Americans could secure affordable coverage.

It hasn’t worked out that way.

Two of the original 17 state exchanges have failed. Half of those that remain are struggling financially.

After getting $5 billion in federal grants, most of the state exchanges have turned out to be a disastrous mix of runaway spending on technology, lower-than-expected enrollment, huge overhead costs, and looming bankruptcy.

If nothing else, the collapse of multi-million dollar state-based exchanges has created a PR problem for health reform, but that’s only part of the issue.

In Massachusetts, there is a stew of simmering revelations about apparent mismanagement of the Health Connector, a once working exchange created in 2006 that upon an update for the Affordable Care Act ceased functioning while consuming $1 billion.

Massachusetts health officials knew the Connector was in trouble for a year before its Oct. 1, 2013, launch date, according to an investigation by the Pioneer Institute, a public policy research organization.

“Instead of raising concerns about the project,” a team of University of Massachusetts Medical School contractors and MassHealth “misled the public by minimizing the shortcomings of the contractor hired to build the website, asked state workers to approve shoddy work and appear to have covered up the project’s abysmal progress in a presentation to federal officials,” said Josh Archambault, a senior fellow at Pioneer Institute and author of the report.

Despite over $205 million in federal taxpayer funding, Hawaii’s Obamacare exchange website will soon shut down. Since its implementation, the exchange has somehow failed to become financially viable because of lower than expected Obamacare enrollment figures. With the state legislature rejecting a $28 million bailout, the website will now be unable to operate past this year.

According to the Honolulu Star-Advertiser the Hawaii Health Connector will stop taking new enrollees on Friday and plans to begin migrating to the federally run Healthcare.gov. Outreach services will end by May 31, all technology will be transferred to the state by September 30, and its workforce will be eliminated by February 28.

While the exchange has struggled since its creation, it is not for lack of funding. Since 2011 Hawaii has received a total of $205,342,270 in federal grant money from the Department of Health and Human Services (HHS). In total, HHS provided nearly $4.5 billion to Hawaii and other state exchanges, with little federal oversight and virtually no strings attached.

“They’ve raised the ire of all these other states that are in Florida’s exact position, and that’s why you’ve seen Kansas and Texas filing amicus briefs in the lawsuit,” Herrera said during a phone interview.

If ObamaCare were working as well as supporters claim, would New York state have just decided to steer more than half of its subsidized exchange enrollees to a public managed-care plan? New York is the second state after Minnesota to adopt a Basic Health Program for households up to 200% of the poverty level. It’s a government-managed health care option included in the 2010 reform law.

Following Minnesota is a curious move. Minnesota has signed up just 22% of those eligible for exchange coverage, 48th among all states and barely half the U.S. average of 42%, according to the Kaiser Family Foundation.

The MNsure exchange also ranks near the bottom in its share of young-adult enrollees (24.2%) and near the top in its share of adults age 55 and up (33%).

To top it off, PreferredOne quit the Minnesota exchange despite being its dominant insurer in 2014, hardly a vote of confidence.

In the 34 states that did not establish Obamacare exchanges, Governors nervously await a Supreme Court ruling that could throw their health insurance markets into chaos. Meanwhile, many of the Governors who did establish exchanges are regretting their decision.

More than five years after its enactment, Obamacare has proven a bitter brew for many states. Nowhere is this more evident than in health care exchanges.

Exchanges began as a figment of Washington’s imagination. The fertile minds of health policy analysts had conjured a bewildering system of cross-subsidies that involved charging young people unfairly high premiums to reduce premiums for older workers, overcharging healthy people to subsidize unhealthy ones, taxing middle income people to subsidize lower-income people (what the President likes to call “middle class economics”), cutting Medicare to enlarge Medicaid, taxing the uninsured for being uninsured, taxing employer-sponsored health plans and taxing employers for not sponsoring health plans, all garnished with tens of billions in new taxes on medicines, medical “devices” (everything from tongue depressors to defibrillators) and, of course, on health insurance itself.